PG&E plans $800 billion RRB for November

Pacific Gas & Electric Co. plans on issuing an additional $800 million energy recovery stranded cost ABS next month, according to a company official. PG&E Assistant Treasurer Nick Bijur confirmed the deal was imminent, and that Barclays Capital, Citigroup Global Markets and Morgan Stanley would jointly lead manage the offering.

This will be the second energy recovery bond of the year for San Francisco-based PG&E. The first, PG&E Energy Recovery Funding 2005-1, totaled $1.9 billion and priced via Citigroup, Lehman Brothers and Morgan Stanley in February. Barclays, a co-manager on the first deal of the year, will be rotated into a joint-lead role, while it is unclear what role Lehman will play in the upcoming offering. The selling group for the series 2005-1 transaction also consisted of ABN AMRO, BNP Paribas, Deutsche Bank Securities and M.R. Beal & Co.

The 2005-1 deal was structured with five, triple-A rated tranches, which priced at one basis point through EDSF for the one-year A1 class and one basis point over swaps for the three-year A2 class. Five-year A3 notes priced to yield three basis points over swaps and both the 6.5- and 7.68-year A4 and A5 classes priced at 11 basis points over swaps. The one-, three- and five-year classes priced one-to-two basis points inside of guidance and the offering was reportedly oversold across the capital structure.

According to the financing order handed down by the Public Utilities Commission of the State of California last November, PG&E is permitted to issue "up to $3 billion of energy recovery bonds in two separate series up to one year apart."

Bijur added that the proceeds from the sale of the bonds will be used to make PG&E whole for losses incurred during the California energy crisis, when the company had to buy power for higher prices than it was allowed to charge consumers, leading to its April 2001 bankruptcy filing. The two deals represent a triumphant return to the ABS market for the company, after an eight-year absence and its stint in bankruptcy (see ASR 2/7/05).

Bijur also quieted rumors circulating in the market that the deal had been postponed from its original issuance date. "Not true," he said of the talk. Officials from Barclays, Citigroup and Morgan Stanley did not respond to inquiries.